US embassy cable - 05CAIRO4532

UNCLAS SECTION 01 OF 02 CAIRO 004532 
 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA, L/CID/JNICOL AND 
EB/IFD/OIA/JPROSELI 
USAID FOR ANE/MEA MCCLOUD 
USTR FOR SAUMS 
TREASURY FOR MILLS/NUGENT/PETERS 
COMMERCE FOR 4520/ITA/ANESA/TALAAT 
 
E.O.  12958: N/A 
TAGS: CASC, EFIN, EINV, KIDE, PGOV, EG, OPIC 
SUBJECT: EGYPT: 2005 REPORT ON INVESTMENT DISPUTES AND 
EXPROPRIATION CLAIMS 
 
REF: STATE 70014 
 
Post is aware of six claims of U.S. persons that may be 
outstanding against the Government of Egypt: 
 
1.  a) Claimant A 
    b) 2001 
    c) In June 2001, the Alexandria Governorate took 
approximately 6,000 square meters of claimant's land (on 
which a factory had been built) to widen the adjoining 
highway.  The Governorate's ensuing construction work also 
damaged a wall and some property.  As a result of this 
action, Claimant A made a request to the Governorate for 
compensation of LE 2 million (approximately $390,000) for 
the seized land and physical damage.  The compensation case 
proceeded smoothly at first.  However, during the final 
stages of the compensation process in late 2003, the 
Governorate informed Claimant A that it did not have legal 
title to the entire property (despite documentation to 
contrary), and thus had no right to compensation for the 
land taken for the highway.  The Governorate officials 
further informed claimant A that it had no right to expand 
operations, sell the land or engage in any legal proceedings 
involving the land, and that Governorate would file a 
lawsuit against Claimant A to reclaim the land.  Because of 
the dispute, Claimant A was unable to expand operations and 
meet growing export orders.  After the Embassy participated 
in a meeting with the claimant and GAFI, the governmental 
investment authority, GAFI established a technical committee 
to review the issue.  In March 2005 GAFI officially 
confirmed Claimant A's ownership of the land and notified 
the Governorate, which offered compensation of less than the 
LE 2 million requested by the claimant.  At the time of this 
report's submission, Claimant A was starting negotiations 
with the Governorate regarding the amount of compensation. 
 
2.  a) Claimant B 
    b) 1992 
    c) Claimant B was awarded a contract in 1989 to 
refurbish an Egyptian Government-owned hotel in the Ain 
Sokhna area.  The Claimant had spent several million dollars 
by 1992 and was ready to inaugurate the project when the 
Ministry of Public Enterprise informed him that the contract 
was null and void.  Both parties agreed to arbitration, 
which resulted in a favorable ruling for Claimant B. 
Nonetheless, the Ministry of Public Enterprises continued to 
demand that Claimant B surrender the assets and took the 
matter to court.  The case was initially denied on the 
grounds that the original contract stipulated that in case 
of legal disputes both parties would seek arbitration.  The 
Ministry then appealed and a court agreed on the grounds 
that the arbitration decisions were never executed. 
Claimant petitioned against this decision and is still 
awaiting further court action.  There has been no change in 
the status of this case over the past year, and Claimant B 
is reported to have withdrawn operations from Egypt. 
 
3.  a) Claimant C 
    b) 1998 
    c) Claimant C secured a $6.2 million, 4-year contract 
with Egypt's then-Ministry of Trade and Supply to provide 
technical assistance to the Egyptian Export Development 
Center and export-promotion support for Egyptian companies. 
The money was allocated from the Ministry of International 
Cooperation through local currency proceeds generated from 
the USAID cash transfer program.  Claimant C began to 
provide training, and an initial payment of $1.6 million was 
due in March 1998.  In June 1998, the claimant received a 
partial payment of $560,000, and the Egyptian Export 
Development Center, under the successor Ministry of Economy 
and Foreign Trade (now the Ministry of Foreign Trade and 
Industry) subsequently cancelled the contract and all future 
services to be provided, claiming services already provided 
were of unsatisfactory quality.  No other payments were 
made, despite Embassy Cairo's numerous approaches to the 
Prime Minister, former Minister of Trade and Supply, former 
Minister of Economy and Foreign Trade and Managing Director 
of the Egyptian Export Development Center.  Embassy Cairo 
repeatedly advised Claimant C to pursue arbitration, but the 
claimant continued to seek a political solution.  At the 
time of this report's submission, claimant was awaiting a 
response to the claim from the new Ministry of Foreign Trade 
and Industry.  The Egyptian Export Development Center was 
closed in 2002, but a new export-promotion center will open 
soon.  The Ministry of Foreign Trade and Industry has 
indicated that once the new center is established, claimant 
will be welcome to submit a proposal to offer services. 
4.  a) Claimant D 
    b) 2004 
    c) The Egyptian National Air Navigation Services Company 
(NANSC), part of the Egyptian Ministry of Civil Aviation, 
contracted with Claimant D to supply seven surveillance 
radars to be installed in seven different locations across 
the country.  Prior to the final stages of the contract, the 
Egyptian authorities seized the company's $3.4 million 
performance bond, claiming performance deficiencies in the 
supplying of proper documentation, spare parts, and test 
equipment.  Embassy Cairo has been involved in discussions 
between the parties and has raised the dispute up to and 
including the level of the Prime Minister.  In August 2004, 
a mediation committee was set up between the GOE and 
Claimant D to resolve the issue.  However, NANSC terminated 
the committee before a decision was reached and did not 
respond to solutions offered by the claimant at the end of 
2004 in pursuit of a negotiated settlement.  In January 2005 
the Minister of Civil Aviation decided to resort to official 
arbitration after meeting with the senior management of 
Claimant D.  At the time of this report's submission, no 
action had been taken on the arbitration.  In February 2005 
Embassy Cairo approached the Ministry of Foreign Trade and 
Industry to assist in negotiations and is awaiting a 
response. 
 
5.  a) Claimant E 
    b) 2005 
    c) In April 2005 Claimant E sent an official complaint 
to the Egyptian customs authorities regarding the importing 
of fake products from China under the claimant's trademark, 
using forged documentation.  Embassy Cairo referred the 
issue to the GOE's specialized office for such matters -- 
the Ministry of Foreign Trade and Industry's Intellectual 
Property Rights Contact Point -- with a request to 
investigate the case and coordinate GOE action to prevent 
further importation of the fake products. 
 
6.  a) Claimant F 
    b) 2002 
    c) In 2002 the Egyptian National Authority for Remote 
Sensing and Space Sciences (NARSS) purchased from Claimant F 
a ground receiving station for $2 million.  NARSS did not 
want to pay in foreign currency and contracted the purchase 
through the claimant's local agent, who signed two contracts 
with the claimant and NARSS in local currency and U.S. 
dollars, in order to hedge the parties against exchange rate 
risks.  The station was to be installed in a new building in 
Aswan that was completed only in late 2004.  NARSS requested 
that the local agent and the claimant start installation, at 
which time the claimant raised a number of concerns 
regarding the condition of the equipment and issues related 
to the contract terms including software license, warranty 
issues and delay penalties.  During the negotiations between 
the parties it became clear that NARSS did not want the 
local agent involved in the case.  The local agent was 
reluctant at first to dissolve the partnership due to 
financial issues, but is now negotiating with both NARSS and 
the claimant to establish a direct relationship between 
NARSS and Claimant F. 
 
7. 
Claimant A: Colgate-Palmolive 
Claimant B: H and H Enterprises 
Claimant C: International Trade and Marketing (ITM) 
Claimant D: Northrop and Grumman Electronic Systems 
Claimant E: Hanover Wire Cloth Inc. 
Claimant F: Datron Co.